Monopsony

Monopsony. A monopsony is the only buyer in a market.

Conditions for a monopsony:

The monopsony must have market power.

Sellers must not be able to sell their goods to buyers outside of their market.

A monopsony will force its suppliers to charge the monopsony a low price. If suppliers do not accept the low price they cannot sell their goods because the monopsony is the only buyer. However, Suppliers cannot profitably supply a lot at a low price so the monopsony buys a lower quantity of its suppliers’ output.